Merseyside expects a £2 billion investment boom after beating the odds to be named as Europe's Capital of Culture, write Sally Pook and Nigel Bunyan

It looks good, feels good and sounds good, according to the judges who yesterday surprised everyone by naming Liverpool as the European Capital of Culture for 2008.

The city, long regarded as the underdog in the competition, beat the favourites Newcastle/Gateshead to the title, which is widely seen as having the power to transform a city's image.

"It is the end of the dark days," said Sir Bob Scott, who led Liverpool's bid. "We can now view the future with enormous excitement and energy. For the first time for too long, Liverpool will represent Great Britain."

One civic leader compared the victory to Liverpool winning the Champions League, Everton winning the double and the Beatles reforming - all on the same day - and Steven Spielberg making a Hollywood blockbuster about it.

The other British cities shortlisted for the title were Birmingham, Oxford, Bristol, Cardiff and Newcastle and Gateshead, making a joint bid.

The EU will respond to Britain's choice next year, but approval is seen as a formality as only British cities were allowed to bid for the 2008 title.

Liverpool, which will celebrate its 800th birthday a year before the cultural jamboree, was keen to emphasise that the city was much more than just the Beatles, Cilla Black and football.

It based its "World in One City" bid on its architecture, the arts, music, sport, humour and on its people, who were clearly a deciding factor in the victory.

Sir Jeremy Isaacs, head of the panel of independent judges, said: "If you had to say one thing that swung it for Liverpool, it would have to be that there was a great sense that the whole city was involved in the bid, was behind the bid and was shouting on behalf of the city.

"Taken overall, Liverpool looked good, sounded good and feels good to be in."

Liverpool, which grew into a major trading city on the back of the slave trade, has undergone massive regeneration in the past decade.

It has some of the country's finest waterfront buildings: the "three graces" comprising the Port of Liverpool, the Liver Building and the Cunard Building, soon to be joined by a fourth in Will Alsop's futuristic Cloud structure.

So highly regarded is the waterfront that it was Britain's sole nomination this year to be considered for World Heritage Site status, already given to the Taj Mahal, the Grand Canyon and Blenheim Palace.

The city also boasts the Tate Liverpool, the Merseyside Maritime Museum, the Fact Centre for film, art and creative technology and the Walker Art Gallery. Outside London, it has the largest collection of Grade II-listed buildings.

Unsurprisingly, Sir Paul McCartney, possibly the city's most famous son, expressed his delight at the news yesterday.

"I am really chuffed at Liverpool getting the Capital of Culture. This will be a much deserved boost for the greatest city in the world," he said.

"The Liverpool people showed their hearts to us when we played there and we will always love them for it." Roger McGough, one of the famous Liverpool Poets, said he was delighted. "No city wanted it more than Liverpool," he said.

Tessa Jowell, the Culture Secretary, added that Prime Minister's wife, Cherie Booth, who grew up in Liverpool, was also thrilled. "She didn't know Liverpool had won, which is further evidence of how well kept the secret was."

The Liverpool Echo made its own more down to earth observation. "Life for Scousers," it opined, "will never be the same again." It is hoped that winning the title will create an estimated 14,000 extra jobs for the city, along with £2 billion in extra investment and a further 1.7 million visitors.

Radio Merseyside celebrated yesterday's success by belting Fantastic Day out into the sunshine. In the Albert Dock, Ken Dodd, the city's self-appointed cultural ambassador, waxed lyrical about its "wonderful past, present and future".

Tickling stick in hand, he spoke of the new mood of "plumptiousness", before paying tribute to the city's artists, musicians and "philosophers like Michael Owen, Wayne Rooney and Steven Gerrard".

Visitors to the city in 2008 will be treated to a festival of light, a festival of comedy, the biggest deaf and disabled arts festival in Europe, and festivals celebrating the city's links with Africa, the Caribbean, South America, Ireland and China.

There will also be a stargazing event, organised by the International Space and Astronomy Centre, the opening of the Museum of Liverpool, Museum of Comedy and an exhibition of contemporary Chinese art.

Sir Jeremy said he recognised that the losing cities would feel "kippered" at the news.

However, the Government has promised to continue to work with the other nominees to try to ensure that some of the developments highlighted in their bids can still be realised.